Flexi-Super plan sparks eligibility debate

Mr Dunne said Maori, Pasifika and other demographic groups with shorter life spans would benefit most from his policy. Photo / Sarah Ivey

Peter Dunne's flexible super proposal has reignited the political debate over raising the age of eligibility for NZ Super with Act Leader and Government ally John Banks slamming the United Future leader's plan as doing little to address the issue of affordability.

But Prime Minister John Key who has pledged to resign rather than raise the age, has again trashed the idea which has the support of Act and the Labour opposition.

Mr Dunne's plan would allow people to choose to take a reduced rate of NZ Super from the age of 60 up to 65, or an increased rate if they deferred taking up superannuation until after 65 up until the age of 70.

Yesterday, he released a Treasury discussion document on the proposal which the Government is committed to considering as part of its post-election deal with him in 2011.

Mr Key said the idea was "not without merit", would not breach his promise over the age of eligibility, and it was possible his Government would support it.

However he has emphasised the policy would be fiscally neutral and would have little effect on the overall cost of super.

But Mr Banks said Mr Dunne's claims that the policy would let Labour "off the hook" from its policy of raising the age of eligibility, "shows a lack of understanding about the effects of this policy".

"The reason Labour pledged to raise the age is to ensure the cost of New Zealand super remains affordable. Mr Dunne's policy fails to do that."

"Rather than just debate the issue of Flexi-Super, ACT would like to see all parties engage in meaningful discussion about the long-term issue of NZ Super affordability.

Raising the age of eligibility would be a good first step," Mr Banks said.

In its long term financial forecast released last month, Treasury said raising the age of eligibility for NZ Super was one of a range of policies the current and future Government's should consider to avoid a long term debt blowout.

But Mr Key this morning said Treasury would always make those recommendations, "because they would always recommend anything that cuts costs".

"But you go and work the numbers of raising the age from 65 to 67, in fact as the long term fiscal forecast proves, it is far less effective than changing the link to average wages and all the other things.

"Everybody argues about the age of eligibility of NZ Super being raised who has a serious debate about, actually in the next breath says you've got to make it less generous and you've got to means-test it, and once you get into that you're into a very different space."

"If we want to have an open honest discussion about it I'm more than happy to do that but anyone who thinks that raising the age of super will fix the economic issues they are dreaming, they will not.

Mr Key said the cost of NZ Super was currently 4.6 per cent of GDP compared to 7.5 per cent back in the 1970s.

"Is it really that big a deal? Well that's not what the 40 year forecast says. We've built it into our 20 year forecasts at its current funding.

"If you really want to say the magical rate is to keep NZ Super at the what it currently costs today then you have to means test, you have to de-link from average wages and you have to raise the age.

"If any political party wants to have that political debate with me on the campaign trail, bring it on."